What Are In Biden's American Families Plan?

President Biden recently announced the third phase of his economic and tax proposals (the first being the American Rescue Plan for coronavirus pandemic relief, and the second being the infrastructure legislation proposed last month). Dubbed the "American Families Plan", the core of the final piece of legislation is a wide range of support for families themselves, including:

• Making the recent expansion of the Child Tax Credit from $2,000-per-child to $3,000-per-child and $3,600 when the child is under age 6 (as established by the American Rescue Plan) permanent instead of lapsing after 2025 (along with making permanent the American Rescue Plan's expansion of the child and dependent care credit as well);
• Support for child care expenses that would cap the cost of child care at no more than 7% of income for families with children under the age of 5 (though the exact mechanism to determine and pay for this is yet to be announced);
• An expansion of 4 years of "free" (government-provided) schooling for children and young adults by extending the existing K-12 approach to also include two years of preschool (for 3 and 4 year olds) and 2 years of tuition-free community college after high school;
• An expansion of the Pell Grants program;
• A new government-funded paid leave program that would ultimately allow up to 12 weeks of paid parental, family, or personal illness leave (covering up to $4,000/month of wages, with a minimum of 2/3rds average weekly wages replaced, but starting with a simple approach of introducing just 3 days of paid bereavement leave per year).

On the other hand, given the projected cost of the legislation - approximately $1.8 trillion - the proposal also includes so-called "revenue-raisers" in the form of various proposed tax increases (to help offset costs), including:
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• An increase in the top income tax bracket from 37% back to the 39.6% rate it was prior to President Trump's Tax Cuts and Jobs Act of 2017;
• Increase the long-term capital gains rate to the ordinary income rate (39.6%, plus the 3.8% Medicare surtax, for a total of 43.4%) for capital gains above $1M; applying the 3.8% Medicare surtax on income from businesses (including S corporations) earning more than $400,000; t
• The elimination of step-up in basis and instead a "forced sale" of appreciated assets at death, triggering capital gains when someone passes away (but with a $1M-per-person exemption to shelter gains for the 'average' household);
• Limitations on both carried interest rules for private equity firms, and a limitation on 1031 like-kind exchange to defer no more than $500,000 of capital gains.

Notably, at this stage, President Biden's proposals are just that - proposals - and it remains to be seen whether the legislation will pass, and/or in what manner they may be altered during the legislative process in Congress to get the requisite votes to pass.

Full details available from the White House on the American Families Plan proposal can be found here.